The German parliament has approved a deal to extend Greece's financial bailout by four months.

A total of 542 MPs within the 631-seat chamber voted in favour of approving the extension.

German Chancellor Angela Merkel's party has overwhelmingly backed the extension of Greece's bailout despite dissension from within their ranks and in the German press. Credit: REUTERS/Hannibal Hanschke

The approval came after Finance Minister Wolfgang Schaeuble - a sceptic of Athens - promised Greece would not be allowed to "blackmail" its European partners.

The vote in the Bundestag was the only major hurdle for the four-month exension for the most heavily indebted country in the euro zone.

Greece's finance minister Yanis Varoufakis said he was pleased with the agreement reached with Eurozone ministers. He said he believes the interest of "the average European above all else" has been served, and that the commitments his country has made are ones his government "wanted to make anyway".

He said: "The weekend will be one of joy and creativity. We are writing our own reforms, with our partners."

IMF Chief Christine Lagarde has welcomed the deal reached between the Greek authorities and the Eurozone finance ministers.

Speaking in Brussels she said the negotiations have been labourious but constructive, and have resulted in a "timeline" for the necessary changes that need to be made. She said the IMF is pleased that work can now begin.